5 Key Steps to Increase Authorised Share Capital


 Increasing the authorised share capital of a company is a common strategy that helps businesses raise additional funds, support growth, and expand operations. However, this process requires a clear understanding of the legal requirements and compliance under the Companies Act. Below, we’ll walk through the five key steps involved in increasing authorised share capital and ensure your company remains compliant throughout the process.

What is Authorised Share Capital?

Authorised share capital is the maximum amount of share capital a company can issue to its shareholders as stated in its Memorandum of Association. Increasing authorised share capital allows a company to issue more shares, which can be beneficial when seeking additional investment.

Importance of Compliance under the Companies Act

Under the Companies Act, increasing authorised share capital involves specific procedures, documentation, and approvals to ensure legal compliance. Adhering to these requirements helps companies avoid legal complications and maintain smooth operations.

Steps to Increase Authorised Share Capital

Follow these essential steps to increase authorised share capital effectively and in line with the legal requirements under the Companies Act.

1. Review the Articles of Association (AoA)

Before proceeding, examine the company’s Articles of Association (AoA) to ensure there are no restrictions or limitations on increasing authorised share capital. If the AoA restricts this action, an amendment will be required. This amendment must be approved by the company’s shareholders and may involve additional legal documentation.

2. Convene a Board Meeting

Once you confirm the company’s eligibility to increase share capital, convene a board meeting to discuss the proposal. At this meeting, the board should formally approve the proposal to increase authorised share capital and decide on the next steps. A resolution is passed, authorising the directors to proceed with the necessary arrangements.

3. Obtain Shareholder Approval

After the board approves the increase, a general meeting of shareholders must be called. Shareholder approval is required for changes to the authorised share capital, and a special resolution must be passed. To comply with the Companies Act, the company must give shareholders notice of the meeting and include details about the proposed increase in share capital.

4. File the Required Forms with the Registrar of Companies (RoC)

Following shareholder approval, the company must submit the necessary forms to the Registrar of Companies (RoC). Key documents typically include:

  • Form SH-7: This form provides details of the authorised share capital increase.

  • A copy of the special resolution passed by shareholders.

  • An amended copy of the Memorandum of Association, reflecting the increased authorised capital.

5. Update Company Records

After filing the forms with the RoC, ensure that all company records, including the register of members and the Articles of Association, reflect the increased authorised share capital. Maintaining accurate records is crucial for compliance under the Companies Act and will provide transparency for future investors and stakeholders.

Conclusion

Increasing authorised share capital is a strategic decision that requires careful planning and adherence to legal requirements. By following these five steps and ensuring compliance under the Companies Act, your company can increase its authorised share capital efficiently and legally. This process supports your business’s growth by enabling it to access additional funding and attract new investors while remaining in line with regulatory standards.

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